Gaewelyn is considering opening a new business for a long-term care facility. The initial investment for the business is $650,000, which includes constructing the housing unit and purchasing other assets. For tax purposes, the projected salvage value of all the assets is $110,000. The government requires depreciating the assets using the straight-line method over the business's life of 15 years. Gaewelyn is trying to estimate the net cashflows after tax for this business. She has already figured out that the business wil generate an annual after-tax cash inflow of $85,000 from the operation. She now needs your help to estimate the net cash inflow that she will receive from selling the facility's assets at the end of 15 years. Gaewelyn's required return is 8%. Required: (1) Gaewelyn estimates that, if the economic is booming at the end of the 15 years, she can sell the assets for $148,000. Assuming the tax rate of 30%, what is the net after-tax cashflow Gaewelyn will receive from selling her assets at the end of 15 years? (Please round your answer to the nearest dollar.) $ (2) If Gaewelyn is able to sell her assets for $148,000, as mentioned in (1) above, what is the Internal Rate of Return (IRR) for Gaewelyn's business? (Please round your answer to two decimal points, i.e., XX.XX%) % (3) Gaewelyn estimates that, if the economy is in recess at the end of the 15 years, she can sell the assets for $80,000. Assuming the tax rate of 30%, what is the net after-tax cashflow Gaewelyn will receive from selling her assets at the end of 15 years? (Please round your answer to the nearest dollar.) $ (4) If Gaewelyn is able to sell her assets for $80,000, as mentioned in (3) above, what is the Net Present Value (NPV) for Gaewelyn's business? (Please round your answer to two decimal points) $
Gaewelyn is considering opening a new business for a long-term care facility. The initial investment for the business is $650,000, which includes constructing the housing unit and purchasing other assets. For tax purposes, the projected salvage value of all the assets is $110,000. The government requires depreciating the assets using the straight-line method over the business's life of 15 years. Gaewelyn is trying to estimate the net cashflows after tax for this business. She has already figured out that the business wil generate an annual after-tax cash inflow of $85,000 from the operation. She now needs your help to estimate the net cash inflow that she will receive from selling the facility's assets at the end of 15 years. Gaewelyn's required return is 8%. Required: (1) Gaewelyn estimates that, if the economic is booming at the end of the 15 years, she can sell the assets for $148,000. Assuming the tax rate of 30%, what is the net after-tax cashflow Gaewelyn will receive from selling her assets at the end of 15 years? (Please round your answer to the nearest dollar.) $ (2) If Gaewelyn is able to sell her assets for $148,000, as mentioned in (1) above, what is the Internal Rate of Return (IRR) for Gaewelyn's business? (Please round your answer to two decimal points, i.e., XX.XX%) % (3) Gaewelyn estimates that, if the economy is in recess at the end of the 15 years, she can sell the assets for $80,000. Assuming the tax rate of 30%, what is the net after-tax cashflow Gaewelyn will receive from selling her assets at the end of 15 years? (Please round your answer to the nearest dollar.) $ (4) If Gaewelyn is able to sell her assets for $80,000, as mentioned in (3) above, what is the Net Present Value (NPV) for Gaewelyn's business? (Please round your answer to two decimal points) $
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Gaewelyn is considering opening a new business for a long-term care facility. The initial investment for the business is $650,000,
which includes constructing the housing unit and purchasing other assets. For tax purposes, the projected salvage value of all the
assets is $110,000. The government requires depreciating the assets using the straight-line method over the business's life of
15 years. Gaewelyn is trying to estimate the net cashflows after tax for this business. She has already figured out that the business will
generate an annual after-tax cash inflow of $85,000 from the operation. She now needs your help to estimate the net cash inflow
that she will receive from selling the facility's assets at the end of 15 years. Gaewelyn's required return is 8%.
Required:
(1) Gaewelyn estimates that, if the economic is booming at the end of the 15 years, she can sell the assets for $148,000. Assuming the
tax rate of 30%, what is the net after-tax cashflow Gaewelyn will receive from selling her assets at the end of 15 years? (Please round
your answer to the nearest dollar.) $
(2) If Gaewelyn is able to sell her assets for $148,000, as mentioned in (1) above, what is the Internal Rate of Return (IRR) for
Gaewelyn's business? (Please round your answer to two decimal points, i.e., XX.XX%)
%
(3) Gaewelyn estimates that, if the economy is in recess at the end of the 15 years, she can sell the assets for $80,000. Assuming the
tax rate of 30%, what is the net after-tax cashflow Gaewelyn will receive from selling her assets at the end of 15 years? (Please round
your answer to the nearest dollar.) $
(4) If Gaewelyn is able to sell her assets for $80,000, as mentioned in (3) above, what is the Net Present Value (NPV) for Gaewelyn's
business? (Please round your answer to two decimal points) $[
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